A new report finds that businesses, just like homes, are devalued in majority-Black neighborhoods. Specifically, the study reveals that highly rated businesses in Black neighborhoods (as measured by Yelp ratings) experience slower revenue growth than poorly rated businesses in otherwise similar neighborhoods. The study’s lead author and researcher, Andre Perry, said one of the results is “that highly-rated businesses in Black-majority neighborhoods experience annual losses in business revenue as high as $3.9 billion.”
Generally, businesses in Black neighborhoods receive lower Yelp ratings and less attention from customers. Similar to voting and Census participation rates, the number of reviews per business sharply falls as the ZIP code’s Black population increases.
Furthermore, says Perry, locating in a Black-majority neighborhood eliminates the advantage of being a highly rated business. In Black-majority neighborhoods, poorly rated establishments grow at roughly the same low rate as highly rated establishments. Perry summed this quandary with consumers having a “dim view of Black neighborhoods.”
The report echoed a similar 2018 report that showed that homes in Black-majority neighborhoods experience devaluation due to racial bias at a rate of 23% on average, when compared to similar homes in otherwise similar White neighborhoods. Perry, Jonathan Rothwell, and David Harshbarger conducted both studies with the backing of the Brookings Metropolitan Policy Program (Brookings Metro) and Gallup.
During a Five-Star Reviews, One-Star Profits: The Devaluation of Businesses in Black Communities presentation on the findings at the Brookings Institution, much of the two-hour panel presentation focused on the challenges small and Black businesses, and non-Black businesses operating in Black communities face.
Martha Legg Miller, Director of the Office of the Advocate for Small Business Capital Formation, said the challenges are the same as with other business. “Same set of challengers, they just hit harder,” she concluded.
Tynesia Boyea-Robinson, President and CEO of CapEQ Impact Investing Advisors, added a jugular that made some think how we evaluate Black business wisdom. “Side hustles show strong entrepreneurship,” she affirmed.